Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS)
(Investment and Tax Mitigation going hand-in-hand)
EIS and SEIS were introduced by the government to offer a series of valuable potential tax savings for IHT, as well as Income tax and CGT.
However, we are focused on ensuring that the ‘tax tail does not wag the investment dog’! No matter how generous the tax relief, we attach great importance to our research and due diligence to assess the investment proposition in its own right.
EIS and SEIS are designed to help smaller higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies. It is also a way of diversifying a portfolio to complement a client’s wider financial planning and risk profile.
Tax reliefs available:
Initial IES Investment
Income Tax Relief
Income Tax relief of 30% on qualifying EIS investments or 50% tax relief on SEIS subject to your personal tax liability up to £1m based on minimum 3 year holding period. This can be used in the current tax year or carried back to the previous tax year.
Capital Gains Tax (CGT)
Any capital gain on EIS or SEIS is tax-free as long as it is held for over 3 years and it qualified for Income tax relief. In addition, a CGT liability can be sheltered, ie deferred, from any disposal made in the previous 3 years or in the following 12 months after making the EIS investment.
Inheritance Tax (IHT)
Once qualifying EIS/SEIS is held for 2 years, the amount invested becomes free of IHT.
If the shares are sold at a loss, an individual can set the amount of the loss against tax at their marginal rate.
Typical EIS / SEIS Investment Sectors
(television, film, and video games)
Venture Capital Trusts (VCTs) are also higher-risk investments in small companies which offer the potential for valuable tax savings, including:
- Up to 30% of the invested sum as Income Tax relief based on a 5 year holding period
- No Income Tax payable on dividends
- No CGT on any gains if a VCT is sold
EIS/SEIS and BPR qualifying investments are smaller unquoted companies which carry a higher level of risk. The content above is for information only, based on our current understanding as at 1 June 2015. We strongly urge you to seek individual advice before making an investment. Past performance is not necessarily a guide to future performance; the value of investments can fall as well as rise and you may get less back than you invest. Tax reliefs and legislation are subject to change.